1980s farm crisis: Jerusalem artichoke miracle crop was a sign
FARGO — Today’s older farmers remember the 1980s farm credit crisis, but the younger ones can barely imagine what it was like.
Themes are eerily familiar: a dramatic rise in farm equity, followed by shocking equity loss, followed by disruptive international grain embargoes and threats of input cost inflation.
As farmers grasped for straws to regain prosperity they grabbed onto dreams, embodied by the spectacular Jerusalem artichoke scheme — a “miracle crop” that turned out to be too good to be true.
Joseph Amato of Minnetonka, Minn., is a professor emeritus of history and former dean of rural and regional studies at Southwest Minnesota State University in Marshall. He’s written 25 books and in 1993 penned the “The Great Jerusalem Artichoke Circus: The Buying and Selling of the Rural American Dream.” In it, he describes a pyramid marketing plan that in 18 months plucked $25 million to $30 million out of the pockets of some 2,500 farmers in several states — mostly Minnesota, South Dakota and North Dakota.Go-go to ‘Oh no’
The farm crisis didn’t come like a “boom,” Amato says, but there were signs.
Farm land values in Minnesota quadrupled after the Soviet Union dramatically increased wheat and feed grain purchases in 1972. The 1973 and 1974 crop years were prosperous, but things tightened up. By 1979, Federal Reserve policies drove farm interest rates from a 6.8-percent average in 1976 to 21.5-percent in 1981.
As the cost-price squeeze tightened, farmers in the Campo, Colo., area started the American Agriculture Movement. On Dec. 10, 1977, AAM attracted 5,000 people to a rally in Lincoln, Neb. In 1978, they attempted to organize a production “strike.” Failing that, they staged a tractorcade into Washington, D.C., in December.
In January 1980, President Jimmy Carter imposed an embargo on U.S. grain sales to Russia to retaliate for them invading Afghanistan.
Farmers were yearning for a miracle and found a Ponzi scheme.Prophets, profits
Fred Hendrickson eventually was nicknamed “Mr. Artichoke.”
In 1980, Hendrickson started promoting Jerusalem artichokes, a cousin to sunflowers, growing 10 feet tall with tuber-like roots that he thought showed promise for alcohol production. In 1981, Hendrickson moved to Sioux Falls, S.D., and gained credibility by promoting ideas of scientists such as B.B. Chubey, an agronomist at the Canadian agricultural station at Morden, Manitoba, and science teachers at Southwest State University in Marshall and Augustana College in Sioux Falls.
Hendrickson soon connected with James Dwire, a construction contractor from Lynd, Minn., just south of Marshall, another evangelical.The AEFS birth
In October 1981, Dwire and Hendrickson formed the America Energy Farming System and patterned it after Amway, a “multi-level marketing” company.
Dwire was president and chief financial officer of AEFS. Hendrickson was secretary and vice president of research. Despite Minnesota Extension Service warnings that the company was overestimating yields and potential for ethanol and human consumption, the company got traction.
In 1981, Warren Spannaus, then state attorney general from the Democratic-Farmer-Labor party, started an investigation at the request of Minnesota Agriculture Commissioner Mark Seetin, a Republican.
Spannaus said AEFS was selling “a seed with no purpose other than selling more seed.”
Farmers were used to new crops becoming big crops. It had happened with hybrid corn and soybeans. They expected Jerusalem artichokes to be as successful, but without any laboratory, genetic agronomic or market work. And a buyer didn’t exist.
Dwire and Hendrickson planned to limit seed growers to 200 in a six-state area but ended up with 450 in North Dakota, South Dakota and Minnesota.
The South Dakota Division of Securities in March 1982 temporarily banned artichoke sales but lifted the ban if the company would give growers a chance to rescind their contracts. None did.
Company salespeople talked about $6,000 per acre profit that would eventually settle down to $1,000 to $2,000 per acre. Meanwhile, soybeans and corn producers were hoping to get $100 an acre return.
Most people put in about $10,000.
Buyers included Jerusalem artichoke believers, early adopters, new crop believers, desperation investors and Christian believers (including Hutterites, Amish, Catholic, and Mennonites.) A third of them came from three states — Minnesota, 509; South Dakota, 288; North Dakota, 81.‘Double portion’
“The whole thing smelled scam,” Amato says.
The company promoted Jerusalem artichokes as easy to grow and a “double portion” crop, a biblical reference. It would produce “4 to 8 pounds of tops, 3 to 6 pounds of tubers and 1 to 2 pounds of roots.”
Don Sheehan, a member of the sales staff and author, gained fame for his catchphrase, “Anoint me with artichokes and set me on fire.”
AEFS promoted a goal of establishing 10 million acres of Jerusalem artichokes in five years and at least 30 million acres in five to seven years.
“The dream astronomically exceeded reality,” Amato wrote, noting that the maximum acreage goal would be met “only if each grower is responsible for ten new growers.”
AEFS officers approached companies about purchasing the crop and took a trip to France. They bought farms and research laboratories and started conducting experiments. The courts would find that the officers embezzled from their own company, which had obligations to farmers.
According to later court action, AEFS executives used corporate money for personal advances without accountability.$1.20/lb to zilch
Jim Nichols, a farmer and former DFL senator from Lincoln County, Minn., was appointed commissioner of agriculture in 1983 and served to 1991. Nichols pushed the attorney general to press for criminal fraud but they settled for a $40,000 fine for improper sales practices and an offer for farmers to rescind contracts.
“Farmers were desperate and when you’re desperate you do foolish things,” Nichols recalls. “There was no market for Jerusalem artichokes.”
Nichols remembers Dwire “always carried his Bible” but was running “just a con job.”
“I remember I had some very intense meetings with him. I was pretty blunt about what I thought about him. It was a total pyramid scheme.” Farmers ended up with tons of artichokes in storage, but they just rotted, Nichols said.
Dwire threatened lawsuits whenever journalists or others told the truth. Among others, he threatened both The Globe in Worthington, as well as The Forum of Fargo-Moorhead.
On May 23, 1983, AEFS filed for Chapter 11 bankruptcy, unable to pay $6 million in grower claims. In September, the court forced them into Chapter 7 liquidation.
In 1984, McLeod County Attorney Peter Kasal at Glencoe, Minn., and an investigator went after AEFS. Dwire eventually pleaded guilty to theft by swindle and served 180 days in jail with five years of work release and paid $5,500 in fines. Hendrickson was sentenced to six months and lost his attorney’s license.
Jerusalem artichokes seed, on the AEFS books for $1.20 per pound, was worth nothing.